Silicon Valley

Past, Present, Future

Russell Hancock
Joint Venture Silicon Valley
Silicon Valley Institute for Regional Studies
Public Policy Program, Stanford University

3 August 2015
My Game Plan
1. A primer on Silicon Valley
• What is it?
• How does it work?
• Why have we been so successful?

2. Silicon Valley today

• Current patterns of growth
• Current strengths
• Current challenges

3. Silicon Valley tomorrow

• Important trends
• future projections
Part One

What is
Silicon Valley?
Common misperceptions
NOT a place you can point to on a map

NOT a place with a defined identity

NOT a planned phenomenon

No Silicon!
So, what is
Silicon Valley？
So what is Silicon Valley?

A remarkably
enduring hotbed of
innovation and
entrepreneurship
Our most important characteristic:
We keep re-inventing ourself
Silicon Valley’s Waves of Innovation
Milestone Silicon Valley Innovations

Vacuum Tube
1940s
Transistors
1950s
Semiconductors, Defense
1960s Technology
Integrated Circuit, Graphical User
1970s Interface
Personal Computers, Workstations,
1980s Relational Databases,
Biotechnology
Network Computing, Packet
1990s switching, Internet Search
Social media, Web 2.0, sharing
2000s economy, clean tech
However, the
Valley’s edge
doesn’t stem from
innovation alone
…
… but also from entrepreneurship
Defense Electronics
1950s Hewlett-Packard, Varian
Semiconductors

1960s National Semiconductor, Fairchild, Intel,

AMD
Biotechnology
1970s Genentech, Genencor
Personal Computers, Workstations
1980s Apple, Silicon Graphics, Sun
Network Computing, Packet Switching
Cisco Systems, Sun
1990s Internet
Netscape, Yahoo, eBay, Google
Social Media
Facebook, YouTube
2000s Sharing Economy
Uber, Lyft, Air Bnb
The Valley also generates
new business models
Internet-based commerce
(Netscape)

Free search, supported by

advertising
(Google, Yahoo)

Music downloads, streaming

(Apple itunes)

Social networking
(Facebook, MySpace)

A la carte television
(Netflix)

On-demand delivery
(Door Dash, Uber, Google Express)
A permanent feature of Silicon Valley:

CHURN
Largest Silicon Valley Employers

1982 2002
1. Hewlett-Packard 1. Hewlett-Packard
2. National Semiconductor 2. Intel
3. Intel 3. Cisco*
4. Memorex 4. Sun*
5. Varian 5. Solectron
6. Environtech* 6. Oracle
7. Ampex 7. Agilent*
8. Raychem* 8. Applied Materials
9. Amdahl* 9. Apple
10. Tymshare* 10. Seagate Technology
11. Palm,* Google,* Cadence,*
Adobe,* Yahoo*
*no longer existed in 2002 *didn’t exist in 1982

Source: Stanford Project on Regions of Innovation & Entrepreneurship

So what’s the secret?
A Habitat for Innovation
Results-oriented meritocracy.

Climate that rewards risks, tolerates failure

Strong markets (capital, labor)

Mobile, fluid workforce

Favorable government policies

University-industry collaboration
Specialized infrastructure (venture funding,
lawyers, executive search, accountancies)
Quality of life
Part Two

Silicon
Valley
today
Silicon Valley was the
last region to succumb
to the Great Recession

The region was adding

jobs through Q4 2008
Today Silicon
Valley is the first
to emerge from
the Recession
JOB GROWTH
Annual change in Total Number of Jobs, 2008-2014
JOB GROWTH
Annual change in Total Number of Jobs, 2008-2014
JOB GROWTH
Annual change in Total Number of Jobs, 2008-2014
JOB GROWTH
Annual change in Total Number of Jobs, 2008-2014
TOTAL NUMBER OF JOBS
9-County Bay Area

+119,576
+3.5%
MAJOR AREAS OF ECONOMIC
ACTIVITY
2013-2014

+40,096

+18,445

+12,294

-491

+57,951
AVERAGE ANNUAL EARNINGS
MEDIAN HOUSEHOLD INCOME
Innovation is thriving.
PATENT REGISTRATIONS
VENTURE CAPITAL
VENTURE CAPITAL BY INDUSTRY
INITIAL PUBLIC OFFERINGS
• Rapid job growth
• Young, well-educated workforce
• Accelerating patent registrations
• Thriving startup community
• Mega venture capital deals
San Francisco and
Silicon Valley
together:
• $20.2 billion in venture capital
• $2.8 billion in Angel investments
• 16,055 startups
• 76,000 new jobs
Is this a bubble?
We don’t think so.
Why not a bubble?
Five years of incremental growth

Profitable companies, serving proven

customer bases

Venture community enforcing a high bar

Region’s portfolio extremely diverse

Economy still moving into promising new areas

Valuations are level-headed

VALUATIONS ARE LEVEL-HEADED

Price-earnings ratio of top-ten NASDAQ companies,

by market cap

Source: Barrons
Part Three

Silicon
Valley
tomorrow
It would appear that Silicon Valley is the
world’s most prodigious regional economy.

So what’s not to like?

Despite our
strengths,
Silicon Valley
faces many
challenges and
has some
structural flaws
One challenge:

Tech is no
longer a tide
that lifts all
boats
DISTRIBUTION OF HOUSEHOLDS BY
INCOME RANGES
HOME AFFORDABILITY
POVERTY & SELF-SUFFICIENCY
Growth is putting a
strain on the region.
COMMUTE PATTERNS
Train travel in other parts of the world
Train Travel in
Silicon Valley
Built in 1863
Another challenge:

Fiscal instability,
failure of our
government
institutions
Our tax system doesn’t track
with the 21st century economy;
no political will to fix it
City Revenues in Silicon Valley
Other challenges:

• Loss of federal funding

• Reversal of immigration trends
• Sagging infrastructure
• Poor K-12 education
Yet we expect
Silicon Valley will
continue its
dynamism and
move into
promising new
areas
One vital trend: convergence
Tech Convergence: Major Research Centers
Convergence firms in the Valley
Another major trend:
We are building
new clusters in
renewable
energy
and clean
technology
CLEANTECH VENTURE CAPITAL
CLEANTECH VENTURE CAPITAL
Summary:
Silicon Valley’s leadership will
continue unabated

Silicon Valley is now joined in its

leadership by other global regions
The region will have to face down
internal challenges to stay
competitive

The private sector will lead the way

Thank you for the honor
of your invitation.
Russell Hancock
President & Chief Executive Officer
Joint Venture Silicon Valley
Institute for Regional Studies
100 West San Fernando Street, Suite 310
San Jose, California 95113
(408) 298-9330

Lecturer in Public Policy

Stanford University
rhancock@stanford.edu

www.jointventure.org